ASEAN recovery hit by new COVID waves

• ASEAN manufacturing sector fall further into contraction territory
• Escalating COVID waves create risks for electronics exports
• Malaysia leads ASEAN GDP downgrades but Thailand still lowest
• Delta blow knocks wind out of Asia's economic recovery
• ASEAN countries need different doses for revival

As a result of the severe negative impact of the COVID-19 pandemic and widespread lockdowns and travel bans, many ASEAN economies were in deep recession during 2020. The impact of global lockdowns in key markets such as the US and EU also resulted in a sharp slump in exports for many ASEAN nations during the first half of 2020. Among the worst hit economies were the Philippines, Thailand, Malaysia, Cambodia and Singapore, as protracted lockdowns hit industrial production, construction and consumption expenditure. Travel bans across the ASEAN region also hit the international tourism and travel sectors severely.

Domestic economic activity showed significant recovery in many ASEAN nations during the second half of 2020 and early 2021, as lockdowns were progressively eased and new export orders strengthened. However, with the onset of new COVID Delta waves in many Southeast Asian nations since April 2021, economic momentum has again weakened in many ASEAN nations.

A surge of COVID-19 infections in Southeast Asia is costing lives and threatening to derail recovery from last year’s painful recession. Except for Vietnam, which managed to keep growing in 2020, getting Southeast Asian economies back to health has been a slow and arduous process. Thailand, the Philippines, Indonesia and Malaysia, for example, were all still in negative territory in the first quarter of 2021, even if the rate at which their economies contracted was significantly slower than the dramatic plunges of the middle of 2020.

However, ASEAN countries registered a strong growth in 2Q21. The strong YoY headline growth is largely the result of the low base last year when the pandemic onset last year severely affected the economy in 2Q20.

Source: BIMB Securities Research - 27 Aug 2021